There is no contradiction between delivering high returns to investors and addressing society’s most pressing unmet needs

Capitalism is the greatest engine for prosperity the world has ever seen and part of its success lies in its capacity to adapt. The historical fact, too often overlooked in our angry debates over the current crisis, is that the capitalism of 1830 was not the same as the capitalism of 1880 or 1930, or even 1980. Rather than defend the existing system or attack it, the crucial question to ask now is: where do we want to take it next?

We believe that move has to be toward what we call “inclusive capitalism“, one in which the benefits are more widely shared by all. It’s no longer sufficient, for example, for business leaders to hail the virtues of “creative destruction” without doing more to address the yawning gap between the skills needed for the new jobs being generated and the abilities of those whose jobs are being destroyed. It’s not acceptable, in an era of rising income inequality, to focus just on delivering measurable shareholder value without generating value for the broader society as well.

The idea that underlies our notion of inclusive capitalism is the need to manage companies for the long term. Companies that manage for the long term worry about the skills and development of their recruits, build sustainable and loyal supplier bases, find ways to counter the short-term pressures of the market and consistently foster lasting relationships with all their stakeholders.

Happily, there is a growing body of evidence that business leaders themselves are taking the lead in pushing for this new direction. To meet the skills/jobs mismatch, for example, companies ranging from Rolls-Royce and Standard Chartered in the UK to Boeing, Intel and Exxon Mobil in the US are redoubling their support for vocational training and apprenticeships. To foster job creation within the hard-hit small and medium business sector, HP, IBM and others have committed to increasing the volume of business supplied by small businesses in their UK supply chains.

On the investor side, two major pension funds – PGGM in the Netherlands and the Ontario Teachers Pension Plan – have carved out new portfolios within their broader equity holdings that ignore the indexes and concentrate on creating value, not through rapid trading, but through long-term engagement with company management.

What we need today are more businesses stepping up to launch similar efforts. It starts with executives who are willing to voice their support for both capitalism and inclusiveness. Business leaders should more publicly make the case for capitalism as the tool that helps overcome barriers for more individuals and entrepreneurs to participate economically.

To make this real, they can commit their businesses to programmes for long-term inclusive growth. No society can thrive if its citizens are not qualified for the jobs it creates; if its small businessmen and businesswomen cannot keep their heads above water; if large companies are not managed for the long term and guided by independent boards of directors; and if business as a whole is not driven by a spirit of conscience. These are, we believe, the most important areas businesses can address through clearly defined, concrete programmes that will create provable impact. A broad-based focus on these areas by the private sector will significantly move us all forward.

In the investment community, for instance, according to a report by the Rockefeller Foundation, “increasing numbers of investors [are] rejecting the notion that they face a binary choice between investing for maximum risk-adjusted returns or donation for social purpose”. The report estimates that this market, known as “impact investing”, is entering the mainstream and offers the potential over the next 10 years for invested capital of $400bn-$1tn.

There is no inherent contradiction between delivering higher returns to investors and addressing society’s most pressing unmet needs. Quite the contrary. Inclusive capitalism rests on the belief that it will take long-term capitalist-led solutions to address the system’s shortcomings and restore the public’s battered trust. Ultimately, rebuilding that trust is about making capitalism work again for the greatest number.